E63 with the M157 has more tuning potential. Doesn't hurt the E63 is lighter, a couple magazines believe steering feel and handling is better in the E63.

I've never driven either so I can't vouch for steering feel and handling. However, I think where the M5 would shine would be the 'overall' package. As the quote goes: "the whole is greater than the sum of its parts"

BMW is notorious for the whole package deal that makes the car so great.

On a personal note, not a big fan of the Mercedes E/S-class styling. The only Mercedes "style" I like are the SLK, SL and SLS. They really need to do something about that finned front grill on their E and S Class... reminds me of old people for some reason...